On 29 September 2012, the Ministry of Industry and Information Technology (MIIT) published a set of draft measures to elaborate on two existing market entry criteria for internet data centres (IDC) and internet service providers (ISP). The public consultation period ended on 28 October 2012.

Background

MIIT had suspended the issuance of telecom licences for IDC since 2008, and for ISP since late 2009 following a national crackdown on internet pornography and other malpractice of ISP providers until such licenses were issued again this year.

The draft measures not only elaborate on the standards required of IDC and ISP telecom licence applicants, but also categorically provide that MIIT will commence the issuance of these licences following the three year moratorium.

Clarifications on two existing market entry criteria

In terms of the proposed market entry criteria, the draft measures provide for the following:

1. Applicants should have "requisite funds and professionals"

By "requisite funds", the draft measures clarify that this is a reference to the position under current PRC laws: that is, an applicant for an IDC or ISP telecom licence must have a minimum registered capital of RMB 1 million for a local business, or RMB 10 million for a cross-provincial or nationwide business. 

In relation to "requisite professionals", this is a reference to the requirement that the number of staff responsible for network and information security should be commensurate with the number of sites accessed. Specific requirements on information security and customer service standards have been set out in the draft measures, e.g. IDC and ISP are required to provide their customers with at least two emergency contacts at any time.

2. Applicants should have "necessary premises, equipment and technology"

The draft measures provide that IDC service providers should have rooms that are equipped with uninterruptable power supply, electricity generators and a cooling system as they are expected to provide a safe and optimal environment for hosting servers and other IT equipment for their customers.

IDC service providers are also required to notify the PRC telecom regulator of information relating to their customers' use of the managed CPU service.

Both IDC service providers and ISP are required to maintain a logging system to record operational information and details of any sites visited by their customers, and link such system to that of the telecom regulator.

Only qualified IDC and ISP can provide domain name registration services. In addition, IDC service providers and ISP should comply with existing regulations on network and information safety.

Observations

Data centres are essential components of the provision of any cloud computing services. In MIIT's 12th Five-year-plan for the telecommunications industry, much focus has been made on the development of a cloud computing industry. The resumption of telecom licence issuance for IDC and ISP is being seen as a key initiative (as reported in our previous article) of MIIT to help promote private investments in these sectors.